 Flipping homes has become an all out American fascination. If you're new to flipping, chances are you've seen those shows on HGTV and think to yourself, "I can do that... what a great way to make money!" But what you may not realize from watching Flip This House or Flipping Out is that flipping homes for profit can be a lucrative and downright risky business. First, there are a few things to consider. Ask yourself the following questions before diving into your first project: - Are you going to be able to sell the home in the current state of the market?
- Are you financially able to afford mortgage payments and taxes if your home does not sell?
- What price can you expect considering the improvements you will be making?
- Are you ready to put a considerable amount of time and money into your investment?
If you answered no to any of these questions, get out now. Flipping can be a roller-coaster ride, and if you are not ready for the personal and financial commitment, I recommend you move on and find another way to invest. With all that said, flipping real-estate can still be a profitable and fulfilling business. Here are some professional tips to help get you started: Do Your Research- I cannot stress enough the importance of research. Before you dive into any project, first spend some time getting as much information about flipping as you can. Talk to your local real-estate agent and learn about the current state of the market. Explore all search possibilities for the perfect home to flip, such as realtor services, classified ads, websites, auctions, and bank foreclosures to find the best deal out there. Look for a home that needs only cosmetic repairs. Consult with a home inspector BEFORE purchasing the home to make sure the home is structurally sound and will not need any costly maintenance. Be Prepared to Work- Plan to devote a large chunk of your time and resources for best results. Be present to monitor and supervise the work. It is also a good idea to document your project with pictures and organized records of repairs, contracts, building permits, vendors, specifications and paint colors. Do whatever you can yourself to save money, i.e. painting. Form a Professional Team- You should form a professional team to assist you in all areas of the flip. Some important people to have on your team include a real-estate agent, mortgage broker, home insurance agent, attorney, and a contractor you can trust. Know What Sells- Improvements to certain areas of the home can really boost your profit. Focus on updating kitchens, bathrooms, flooring, and landscaping to make an impression on your potential buyers. For kitchens, it's all about cabinets, granite countertops, and new appliances. For bathrooms: tile and a clean layout and design. Adding wood or tile flooring throughout the home can substantially increase its value. You can also enhance your home's curb appeal with some elegant landscaping. Know Your Numbers- Be sure to know ALL the cost associated with flipping. These Include:
Purchase costs- upfront mortgage fees, attorney's fees, regular closings fees, title, survey, etc. Carrying costs- it's more than just the repairs! When you're flipping real estate, you're likely paying higher interest rates than on a primary residence or second home. In addition to the repairs, you have to consider monthly payments, taxes, insurance, utilities, etc. Selling costs- again, you have to consider closing costs and possibly real estate commissions.
6. Expect the Unexpected- regardless of whether this is your first or fiftieth flip, you will run across something that you didn't expect. You'll almost always run at least a little over budget or hold it a little longer than you anticipated. Stay patient and stay with it. (Posted by K.Skowronski)
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